Y6

Consider a monopolist that faces an inverse demand curve given by P(Q)=277-2Q and that has a cost function given by C(Q)=5Q. Suppose the monopolist uses a declining-block pricing scheme. It charges a price, P, on the first Q units (the first block), a lower price, P2, on the next Q-Q units (the second block), an even lower price, P3 on the next Q3 - Q2 units (the third block), and so on. If the monopolist is using 4 blocks, what price will it charge to consumers that purchase more than Q units but no more than Q3 units? I.e., what is P3? [Hint: consider the form of the marginal cost function] OA. 119.49 O.B. 113.80 O C. 130.87 O D. 102.42 OE. 136.56